MUMBAI Credit agencies Moody's and Fitch downgraded Reliance Communications to default levels on Tuesday, their second ratings cuts in as many weeks, after the telecoms company said it had won a reprieve from lenders that would allow it to avoid paying back its loans until December.The two agencies said the reprieve technically constituted a default under their ratings definitions, given the company widely known as RCom would miss loan payments. RCom secured the reprieve after promising lenders it would complete two key deals - the merger of its wireless division with rival Aircel and the sale of a stake in its mobile masts business - that would allow it cut its $7 billion debt by 60 percent.But the agencies warned RCom's debt levels could remain unsustainable even if it completes the two transactions.

Moody's Investors Service said RCom would still have $3 billion in remaining debt and uncertainty about whether it could generate enough cash flow after the two deals. Fitch Ratings similarly warned RCom, India's seventh-ranked mobile carrier by users, would be saddled with "excessive" debt.The downgrades - coming just days after both agencies had cut Reliance debt deeper into so-called "junk" territory - will cast a further shadow over prospects for RCom, which has seen its market value slump by a third since early May amid worries about its debt levels.

"Given the heavy debt load and the uncertainty regarding the cash flow-generating capabilities of the residual businesses post demerger and asset sales, Moody's believes the capital structure of the remaining business will remain weak," the agency said in a statement.Moody's downgraded the company to "Ca" from "Caa1," while Fitch downgraded it to "Restricted Default (RD)" from "CCC." Fitch also downgraded RCom's 6.5 percent senior secured notes due on 2020 to "C/RR4" from "CCC/RR4."

RCom's shares gained 0.7 percent on Monday after the company announced the reprieve on Friday. But they resumed their losses on Tuesday, ending down 3.1 percent.Costly airwave auctions have bruised India's telecom sector, but it was a price war triggered by the arrival last year of Reliance Jio Infocomm Ltd that brought the sector to its knees.RCom posted a second consecutive quarterly loss last month.($1 = 64.4200 Indian rupees) (Reporting by Abhirup Roy; Editing by Rafael Nam and Mark Potter)

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